Decisions on whether to buy or lease your next vehicle depend on many different considerations, so take some time to assess your needs and budget before making a final choice.
Leasing can be an attractive option for some because it generally costs less than purchasing outright, yet leasing often has its drawbacks.
Lower Monthly Payments
One of the primary advantages of leasing over buying is lower monthly payments – something particularly helpful if you don’t have much money set aside to put down on a car purchase.
However, leasing requires paying a percentage of depreciation during the lease term; hence why leased vehicles often have higher residual values.
Be mindful that leasing vehicles comes with mileage restrictions and other restrictions that limit how far or often you can drive, plus there could be fees associated with any modifications you make to it.
As such, it is wise to do your research prior to making the decision whether to purchase or lease a car based on your financial status and personal priorities.
No Down Payment
Leasing can be an attractive solution for those who desire the latest models or don’t have access to sufficient credit and funds for buying new cars, while purchasing is generally the better choice if your plan is to keep driving it over an extended period. However, leasing may be better for short-term needs where miles driven will need to be factored in as part of an equation.
Leasing allows you to drive a brand-new car for an extended period, usually two or three years. An upfront payment covers fees and taxes; then monthly fees continue for the duration of your lease term.
More Expensive Vehicles
If you’re shopping for an upscale vehicle, leasing could be the way to go. Leasing allows you to access cutting-edge technologies at an affordable monthly payment.
However, if you plan to keep the car for more than three years, purchasing may be the more affordable choice as each loan payment will help build equity and you’ll own the vehicle at the end of its term.
Although leasing can help save on monthly payments, it is also wise to factor in its resale value when making this decision. Many new cars sell for well above their original MSRPs which poses a potential long-term risk for buyers.
Lease vehicles usually include routine service as part of their agreement, which could help reduce maintenance costs. Drivers should however be careful not to exceed their mileage limit as each additional mile will increase costs significantly.
Finding a balance between leasing and buying can be tricky, but ultimately comes down to your priorities and personal circumstances. Leasing can provide the thrill of new car ownership without incurring maintenance costs for years, which makes leasing an excellent way to meet these criteria.
But if you plan on keeping your car for several years and plan to put many miles on it, buying may be the better financial move. As an owner, you’ll also build equity through loan payments which could eventually allow for selling it at a cash profit if you decide to upgrade later on.
Leasing does not build equity and locks you into an ongoing cycle of payments for several years – even though early termination may cost extra money – which makes it important to carefully investigate all available options and assess your finances before making your final decision.